Updated 5.23 with shareholder's appeal.

The government and a major shareholder of the former National Bank of Malta have both appealed court sentences ordering the government to pay the shareholders nearly €111 million as compensation after the bank was closed and later replaced by Bank of Valletta

The bank closed down in 1973 and BOV was set up instead of it by the government.

Last month, the court ordered the payment to shareholders after finding in an earlier judgement that they were deprived of their shares without compensation in breach of their fundamental rights. 

In court documents filed on Monday, the government said its intervention to save the National Bank's banking activity by setting up another bank to handle it was needed to avert an economic disaster, the loss of depositors' funds and jobs. 

The government said that while the courts had recognised this need, the court's sentences still adopted a "negative vision" and imposed a penalty on current public finances for having averted an economic disaster in 1973, as if what had been done was wrong.

"The government declares once more that the National Bank had been taking risks it could not handle and 40% of its loans portfolio could not be paid on time."

It said that in 1972 the National Bank had already seen a loss of capital and deposits and in 1973 it could not control a run. Had the government not intervened, using public funds, the bank would have collapsed. 

The shareholders were not ready to invest their own funds to recapitalise the bank and the conditions were not in place for the Central Bnak to act as a lender of last resort, which, in any case, could not stop a deposit run. If anything, that would have made the run even worse.

It was the owners of the National Bank themselves who had invited the government to take over the bank, since that was also in their interests, ensuring they did not lose their own deposits and facilities in the bank, the government said.

It complained in the appeal documents that the court had relied solely on one expert and had not considered the work of another expert, despite acknowledging her "valid work". That expert had concluded that the National Bank shares in 1973 were worthless and the bank was insolvent. 

"Had the bank been left on its own in 1973 it would have collapsed and created a disaster," the government insisted.

It also pointed out that the shareholders had instituted their court cases 18 years after the event, after making sure that their bank facilities were safe, thanks to the government.

The court could therefore have dismissed the cases since their purpose was abusive.

Shareholder: Compensation should not be equal to all shareholders

One of the larger shareholders in the National Bank saga also filed an appeal, arguing that the way how the compensation was apportioned by the court had created another injustice and a situation of unjustified enrichment.

Lawyers for Joseph Gauci requested the Constitutional Court to confirm the compensation but to vary the way the liquidated sum is to be divided among the shareholders.  

It was explained that after calculating damages, the first court, presided over by Mr Justice Joseph R Micallef, had declared that the global sum exceeding €111 million was to be apportioned equally among two sets of 33 and 49 applicants.

That meant that each applicant would end up receiving an equal sum irrespective of the extent of their shareholding in the National Bank. 

And that would result in a “blatant injustice,” argued Gauci’s lawyers, Jose’ Herrera and David Camilleri. 

Those having far fewer shares would unjustly enrich themselves to the detriment of Gauci.

To avoid this, the court ought to apportion compensation according to the number of shares held by each shareholder, they insisted.

If the court could not determine the share of each applicant, then the matter ought not be prejudiced until it was resolved either amicably or by means of litigation, argued Gauci, requesting the court to address his appeal accordingly.